First quarter Performance reports of Universal Access Agency of South Africa, Media Development and Diversity Agency, International Marketing Council of South Africa & National Electronic Media Institute of South Africa

Meeting report

Briefing by the Universal Service and Access Agency of South Africa (USAASA)
Mr Louis Muahludi, Chairperson of the USAASA Board introduced the delegation from USAASA to the Committee. He was unable to provide a reason for the absence of the Chief Executive Officer. The Chairperson of the Committee insisted on a written explanation of the failure of the Chief Executive Officer of USAASA to arrive at the meeting on time.

Prof Shaun Pather, Member of the USAASA Board explained the context of USAASA’s five key projects (see attached document).  The key projects were the administration of the government subsidies for Set-Top Boxes (STB’s) (which was part of the Broadcasting Digital Migration (BDM) program); a pilot project in the Limpopo province to provide broadband infrastructure; the provision of public access facilities in under-serviced areas; the monitoring and evaluation of the effective utilisation of social appropriation and policy, strategy and research.

Ms Thandeka Mngadi, Executive Manager: Performance Management, USAASA presented the first quarter achievements for the STB subsidy project, the broadband infrastructure project and the project to provide public access facilities in under-serviced areas.

Partnerships with the public and private sectors had been established for the delivery of 444,558 STB’s during 2011/12.  Systems for the administration of the subsidies had been designed.  An amount of R2.45 billion was made available to subsidise the acquisition of STB’s by an estimated 5 million poor television-owning households during the dual illumination period. R220 million was made available for the 2011/12 fiscal year.  R9.7 million was allocated to build capacity for BDM. The BDM program was on hold, pending approval of the national strategy.  During the first quarter the objectives to develop a communication strategy and plan, s stakeholder engagement plan, an application and verification system, a prototype coupon system and a qualifying means test were achieved.  An overview of the progress made in capacity building, community awareness and subsidy disbursements was provided.

The broadband infrastructure project would be piloted in the Tzaneen area of the Limpopo province. The area was selected because the Limpopo province had already formed a joint venture with the Meraka Institute of the Council for Scientific and Industrial Research (CSIR) to provide broadband services to 150 schools in Sekhukhune. A budget of R9 million for the project had been made available. A workshop had been held with the key stakeholders. However, the project was under review as it had been found that the objectives of the key stakeholders and USAASA were not aligned.

The project to provide new public access facilities in under-serviced areas was under review.  A budget of R19.8 million was made available to provide 20 access centres during the first quarter.  Only one centre (Ulwazi in the Western Cape) was completed.

Prof Pather took the Committee through the first quarter achievements in the monitoring and evaluation project. An amount of R975,832 had been made available. A list of the ICT impact indicators had been agreed with the key stakeholders.

Ms Mngadi summarised the project objectives for research, strategy and policy. The project was allocated a budget of R2.75 million. The first quarter objectives had not been achieved.

The briefing was concluded with a summary of the variance report for the first quarter of 2011/12.  The total budget for the period was R21,033,000. Actual expenditure was R3,991,964. The variance of R17,041,036 was mainly attributed to under-spending on training and skills development (R1.3 million), the broadband infrastructure project (R9 million) and the provision of access centres (R6 million).  A detailed first quarter report was provided.

Discussion
Mr K Zondi (IFP) asked what the strategy was for the distribution of the STB’s. He asked what the dual illumination period was.  By his calculation, approximately R600 million of the funding for the subsidisation of STB’s had been made available to date. He wanted to know when the entire amount of R2.45 billion would be spent.  He noted that the target of 367,000 STB’s had been rolled over from the previous year and wanted to know if these STB’s had been distributed.

Mr N Van den Berg (DA) said that it was important that all the entities concerned with digital migration were coordinated and worked towards the achievement of a single national goal. He wanted to know if USAASA’s objectives were aligned with the objectives of the other stakeholders and reflected the national strategy.  He asked for more clarity on what progress had been made, which objectives had not been met and what the target dates were.  He was concerned over the process of identifying needy households that would qualify for the STB subsidy. The process had to include controls to ensure that only needy, poor households benefited and that the funds were not wasted. He wanted to know what the current status was of BDM. He asked for more information on the public/private partnerships that had been formed, the systems that were developed to administer the subsidy and what was being done to build BDM capacity. He asked what services were available at the Ulwazi public access center.

Ms W Newhoudt-Druchen (ANC) asked if any STB’s had been distributed.  She wanted to know what the criteria were to determine who should receive the subsidy and if the subsidy would be available to persons with disabilities. She asked how the subsidy amount of R490 per STB was determined. She asked if any organisations for the disabled had been informed of the subsidised STB’s. The definition of ‘universal access’ and ‘universal services’ was a long-outstanding issue. She wanted to know who was responsible and when the definitions would be finalised.

Mr C Kekana (ANC) noted that USAASA had underspent an amount of R17 million during the first quarter, despite the need for services.

Ms N Michael (DA) referred to reports in the media that the average South African had no access to digital broadcasting services. There was little communication on BDM and she wanted to know what was being done to educate the public. She warned that certain retailers were selling decoders with false claims that television viewers would be able to receive digital transmissions. She asked what the non-subsidised cost was of a STB. She asked if USAASA was engaging with the Independent Communications Authority of South Africa (ICASA) on local loop unbundling in providing broadband infrastructure. Very few South Africans currently had access to broadband services. Access to broadband services had to be cheap and universally available to allow the country to achieve its communication goals.

Ms A Muthambi (ANC) asked for more information on the STB subsidy project, the misalignment of objectives and the review of the project to provide broadband infrastructure and the approval of the national BDM strategy that was awaited. She asked if key performance indicators had been set for the monitoring and evaluation project.

Ms T Ndabeni (ANC) suggested that Members of the Committee visited a public access centre such as Ulwazi.  She asked if USAASA had a functional internal audit unit in place to check if goals and strategies were being achieved. She asked if USAASA had an operational plan in place that allowed the entity to achieve the objectives of its key projects.

Ms Mngadi responded that an operational plan and a risk strategy had been developed. The service provider for the public access centres was only appointed during the fourth quarter of the previous year and had managed to complete 23 of the 36 centres. The project was being reviewed after input was received from stakeholders and the Committee’s oversight visits. The adequacy of the budget provision was being assessed.  USAASA wanted to derive the maximum possible benefit from the available funding.

Ms Ndabeni asked what USAASA would do if it found that more funding was required than had been made available.

Ms Mngadi replied that the purpose of the review was to maximise the available funding and not to motivate additional funding.

Prof Pather confirmed that no STB’s had been distributed.  The funding of R2.45 billion was determined on the basis that there were 5 million needy television-owning households. R600 million had been appropriated to date.  The role of USAASA was to administer the STB subsidy. There were other stakeholders in the BDM process and all plans had to be approved by the DBM office in the Department of Communication (DOC).  During the first quarter, USAASA had developed a means test to determine if a household qualified for the subsidy.  An application form had been designed and the broad procedure had been determined.  The objectives set for the first quarter had been met in this respect but the preparatory work that had been done must still be ratified. USAASA played no role in the manufacture of STB’s and had no influence over the cost to the consumer. The definitions were gazetted but had to be withdrawn to correct an error.  The corrected definitions were now ready to be gazetted. A more detailed briefing on under-serviced areas would be provided to the Committee at the following meeting.

Mr Phineas Moleele, Chief Executive Officer, USAASA apologised for his late arrival at the meeting.  He explained that STB’s was a single component of a lengthy value chain for BDM.  USAASA was tasked with disbursing the subsidy to the estimated 5 million needy households. It was anticipated that the number of households would increase as many jobs had subsequently been lost. The estimated cost of an STB was R700, of which 70% would be subsidised. The National Treasury had made funding available for the program since 2008.  Ongoing discussions with the Treasury on the adequacy of the funding were taking place.  USAASA had raised the issue of communication with the DOC. Other stakeholders in the process included Sentech, the South African Post Office (SAPO) and the South African Broadcasting Corporation (SABC). The model developed involved giving a coupon to the qualifying household and the subsidy was redeemed by the retailer.  Community developers would be used to gather the data on needy households. The data collected by the South African Social Security Agency (SASSA) was for individuals, rather than households.  He was unable to confirm how up to date the available data was.  The processing of applications would be a major exercise and a number of issues still needed to be resolved, for example, whether applicants would have to produce a television license.  The DOC coordinated the engagement between the various stakeholders. USAASA had no position on the decoders that were sold by retailers.

Prof Pather explained that local loop unbundling (LLU) concerned the unbundling of the copper cable network.  The copper cable network had not been extended to the under-serviced areas in any event.  LLU would have a marginal impact on the provision of broadband services in rural areas.  The Meraka plan involved the installation of wireless networks in under-serviced areas.

Ms Mngadi explained that the provinces of Limpopo and Mpumalanga were selected because the provincial and local authorities were ready for the pilot projects. Offices had been established in the Western Cape, KwaZulu Natal, Eastern Cape and Free State and the Northern Cape and North West provinces would follow in the near future.

Ms Ndabeni asked if all the provinces were on board and providing support. She asked if community development workers were being trained.

Mr Moleele explained that USAASA had found that the other stakeholders involved in the pilot project in Limpopo (Sentech, CSIR and Infraco) had different objectives for the provision of broadband infrastructure. The misalignment of the objectives of the various stakeholders was under discussion.

The Chairperson asked if USAASA had presented its plan to Parliament without prior consultation with the other stakeholders to ensure that the objectives were aligned.

Mr Moleele replied that the plan had been to provide municipalities with broadband access on a small scale.  The municipalities had more extensive plans.

Ms Ndabeni askd if USAASA had undertaken a situational analysis.  The normal process was to approach the provincial authorities before examining the municipal integrated development plans (IDP’s).  USAASA had to determine what projects would be sustainable and could be integrated with the IDP’s.

Ms Muthambi wanted to know what the impact of the misaligned objectives would be on the objectives for the subsequent quarters.

The Chairperson asked if USAASA had analysed where the most impact was required.

Mr Moleele conceded that USAASA had imposed itself on municipalities in the past, which was the reason for the number of unsustainable projects.  The Committee’s concerns were noted and would be addressed.

Prof Pather advised that accurate data was not available to assess where the greatest impact would be made. The DOC drove the national broadband strategy and the strategy of USAASA was developed accordingly. USAASA had invited municipalities to submit their ICT plans and had developed business plans to ensure projects would be sustainable. USAASA took into account that consultation had not been broad enough in the past.

The Chairperson said that the Committee had taken note that USAASA did not have a fundamental plan in place and was likely to miss the targets that had been set.

Ms Muthambi asked for more information on the review of the project to provide public access areas.

Ms Mngadi explained that the annual target was for 44 centres to be completed in 2011/12. The target for the first quarter was 20 centres. Only one centre was completed before the end of the first quarter. The budget for the first quarter was R19.8 million. The service provider had completed 23 of the 36 centres before the end of 2010/11. This had been a good achievement as the service provider was only appointed in the third quarter of the previous year. Discussions with the municipalities and tribal authorities took longer than the three weeks that had been anticipated.

Ms Ndabeni strongly disagreed that the service provider had done a good job.

The Chairperson asked how many service providers had been appointed. He asked if provision had been made for penalties if the service provider failed to complete the contract on time. He wanted to know how much had been paid to the service provider.

Ms Mngadi confirmed that only one service provider had been appointed. The amount paid to date was R15 million. Experience had been gained and the review of the project involved the lessons learned, addressing the failures, appointing more service providers and reviewing the memoranda of understanding.

Mr Moleele added that USAASA preferred to take remedial rather than punitative action. The results of the review exercise would be included in the report on the second quarter. Sites for the additional centres had been identified and a procurement process was in place. The contract with the current service provider had not been renewed and the completion of the remaining centres was on hold.

The Chairperson was scathing in his condemnation of the failure of USAASA to deliver on the targets that had been set. He wanted to know what recourse was available to hold the service provider accountable for the failure to complete the contract on time. He asked who would carry the cost of appointing new service providers.

Mr Moleele replied that the contract with the service provider included the quarterly targets and penalties.  This had been the first project to provide the access centres. USAASA decided to review the project and much had been learned that was not originally anticipated.

Ms Ndabeni agreed that a new model had been used. However, the service provider was given specifications and presumably USAASA had appointed the best qualified applicant. She asked if the service provider had the necessary capacity to complete the contract. She noted that the service provider had been paid a substantial amount despite having failed to complete the contract. She asked if USAASA had legal recourse against the service provider.

Mr Moleele replied that USAASA had recourse in common law and could take legal action to reclaim penalties from the service provider.

The Chairperson said that USAASA appeared to lack the capacity to spend the funds that had been made available. Additional funds would not be made available if the entity failed to spend its budget.

Ms Ndabeni noted that the report had made no mention of the access centre that was opened by the Minister at Msinga in KwaZulu Natal. She wanted to know what lessons had been learnt and what the current status of the centre was.

Mr Moleele reported that there had been a problem with the ICASA license.  He conceded that more needed to be done to ensure that the access centres were financially sustainable.

The Chairperson hoped that the report on the second quarter of the year would reflect an improvement in the performance of USAASA.

Ms Ndabeni asked the DOC to ensure that the necessary support was provided to USAASA.

Briefing by the Media Development and Diversity Agency (MDDA)
Mr Lumko Mtimde, Chief Executive Officer, MDDA presented an overview of the background, legislative framework, vision, mission, mandate and objectives of the Agency (see attached document).

The overall objective of the MDDA was to ensure that all citizens could access information in the language of their choice and to transform media access, ownership and control in South Africa. The various partners, beneficiaries and sources of funding were listed. The key result areas were identified as grant funding; fundraising and resource mobilisation; research, knowledge management, monitoring and evaluation; advocacy for media development and diversity and the provision of diverse and quality content. The Agency had to meet certain regulatory and funding agreement requirements. Print media funding was not prescribed and continued to decline. Private sector funding agreements restricted expenditure on administration and research to 10%. Discussions between the DOC and the National Treasury were underway to transfer funding for community radio capacity building from Vote 26 (Communications) to Vote 8 (GCIS).

Mr Nkopane Maphiri, Programme Director, MDDA presented the detailed progress report for the first quarter of 2011/12 for each of the key result areas.  The MDDA had achieved the objectives set for the first quarter period.  Details were provided of the budget and actual first quarter expenditure for the deliverables per key result area.  The total budget amount for the key projects was R36 million.  60% of available funding was allocated to community media projects, 25% was allocated to small commercial media projects and 5% was allocated to research and training.

Mr Mshiyeni Gungqisa, Chief Financial Officer, MDDA gave a breakdown of the operating expenditure performance for the first quarter.  The Agency reported under-spending on administration costs (R530,056), employee costs (R45,499), Board costs (R7,699) and programme administration costs (R468).  The reasons for the variance and the corrective action taken were provided.

Ms Phumelele Nzimande, Member of the MDDA Board concluded the briefing by thanking the Committee for its ongoing support.

Discussion
Ms Muthambi asked for a detailed explanation of the under-spending reported for the first quarter.  She noted that the performance report had omitted the actual amounts spent to date for certain programmes but no explanation had been provided.

Mr Kekana had been impressed by the performance of a young girl from Soweto on a television programme, despite having a background of poverty and indifferent education.  He questioned if society was benefiting from all the effort and congratulated the MDDA for moving into the right direction.

Ms Nzimande explained that the attendance of Board members at meetings was generally good.  The underspent amount was caused by the inability of certain members to attend meetings because of pressure of work, the resignation of one member and the fact that certain members refused remuneration.  The members of the MDDA Board were committed.

Mr Mtimde advised that the annual report of the MDDA would be tabled on the same day.  The information reflected the annual budgeted amount and the actual expenditure for the first quarter.  The Agency had amended its original recruitment policy and currently recruited white and disabled persons as well.  A conference had been arranged in Cape Town for the following week and would be attended by media literacy trainees.

Mr Gungqisa explained that the variance in the operational expenditure was caused by the late receipt of invoices.  Expenses were recorded when incurred but only paid once an invoice was received.  The under-spent amount of R468 for administrative costs was relatively negligible.

Mr Mtimde assured the Committee that the management of the Agency ensured that employees strictly adhered to the financial management systems and procedures.

The Chairperson congratulated the MDDA for the innovative use that was being made of Facebook.

Briefing by the International Marketing Council of South Africa (IMC)
Ms Anitha Soni, Chairperson of the IMC Board presented an overview of the domestic and international mandate of the IMC, the desired outcomes and strategies, the integrated approach to achieving South Africa’s competitive identity, the country’s key markets, the key focus areas for 2011/12 and the executive summary of recent highlights (see attached document).

Mr Miller Matola, Chief Executive Officer, IMC presented the quarterly report for the period April to June 2011.  The major trends and developments impacting on the work of the IMC were summarised.  The performance of the Council was indicated by the results of a recent domestic perception audit and South Africa’s ranking in international nation brand reputation, global competitiveness, country reputation and brand equity indices.

The key outcomes were brand alignment, increased pride and patriotism, contextualization and articulation of policy, positively changed perceptions, economies of scope and scale and a sustainable organisation.  The IMC’s performance for each outcome was summarised. A detailed impact report on Brand South Africa for the first quarter of the period was included. Changes were made to the business plan to accommodate the new Programme Manager/Coordinator positions for the United States of America, the United Kingdom, Brazil, Asia and head office.

Mr Tami Kubheka, Acting Chief Financial Officer, IMC presented the financial performance as at the end of June 2011.  Total budgeted revenue for 2011/12 was R142.2 million.  Total budgeted expenditure was R140 million.  A surplus of R20.5 million as at the end of the first quarter was related to the late approval of certain projects and the late receipt of invoices from other countries.

Mr Matola was satisfied with the financial performance of the Council.  The briefing was concluded with a summary of the current corporate governance and control issues and the key projects for the second quarter period.

Discussion
Members of the Committee had no questions on the briefing by the IMC.

Briefing by the National Electronic Media Institute of South Africa (NEMISA)
Mr Ndivhoniswani Tshidzumba, Chief Executive Officer, and Mr Takalani Nwedamutswa, Chief Operating Officer, NEMISA took the Committee through the performance report for the first quarter (see attached document).

The briefing included a summary of the key performance indicators, desired output, target, achievements, challenges and corrective measures for each of the five strategic objectives. The objectives were to establish NEMISA as a technology, research, training and development centre of excellence in ICT; to ensure financial viability and institutional sustainability; to ensure an efficient and effective organisation; to develop stakeholder and partner relations and to expand the accessibility and reach of NEMISA product offerings.

A major challenge was the lack of adequate funding, which compromised the achievement of most of the targets that had been set for the first quarter. Delays were experienced in obtaining accreditation for certain of the training programmes offered by NEMISA, with the result that students had not received certificates for completed training courses. There were not enough moderators and the Institute struggled to obtain sufficient funding for the training programmes and training equipment. There was increasing demand for an effective student welfare programme. The organisational objectives were delayed due to limited availability of staff and resources. NEMISA had submitted fundraising proposals and applications for funding to the DOC and awaited the outcome.

Ms Moira Malakalaka, Chief Financial Officer, NEMISA presented the financial performance for the period April to June 2011. Total income was R8.8 million but total expenditure was R9 million. The deficit was attributed to unforeseen increases in establishment costs, for example electricity and water services. NEMISA had approached the DOC for assistance and attempted to increase training revenue from the DOC and stakeholder entities.

Discussion
Ms Newhoudt-Druchen was concerned over the lack of performance, which contrasted with previous, positive reports.  She asked for clarity on the problem that had resulted in students not receiving certificates once their training courses had been completed. Statistics were not provided for the number of students participating in e-learning and blended learning courses. She wanted to know why there was a need for a student welfare programme and how many students required assistance. She asked if NEMISA had a plan to address the technical challenges.  She asked how NEMISA planned to address the revenue deficit.  She asked for an explanation of the R24,000 expenditure for student stipends, despite the fact that there was no budget allocation for this item.

Mr Nwedamutswa explained that the students had completed the training course in 2008.  At the time, NEMISA had not received accreditation for the course from the relevant Sector Education and Training Authority (SETA).  Recognition was being given for prior learning and students were being traced and recalled to attend a course that would allow them to receive an NT4 qualification.  The process of acquiring accreditation of the TV and radio qualification had taken three years.  Employers understood the value of the NEMISA training course and accepted the students without the formal qualification but the risk to the students were understood. Research was currently undertaken on e-learning and the programme had not yet commenced.

Mr Tshidzumba advised that one staff member was appointed to provide welfare assistance to students.  However, there was an increasing demand for assistance from needy students and NEMISA had submitted a proposal for funding to the DOC. After ten years, the technological environment had undergone significant change and it had been necessary to review the technological plans.

Ms Malakalaka explained that NEMISA’s budget had been increased by only 3%.  The budget increase had been less than the inflation rate.  Discussions were being held with the DOC and NEMISA had embarked on a cost-cutting exercise.  The Department was committed to providing additional resources and support.  NEMISA had developed business proposals as well, for example student bursaries were funded by private enterprises, NEMISA services generated profits and a fundraising strategy was devised.

Mr Tsediso Gcabashe, Chairperson of the NEMISA Board added that the ability to undertake research was essential for an academic entity such as NEMISA.  An annual risk assessment was undertaken, which affected the strategy of the organisation.

The Chairperson said that the Committee had been misled by the previous NEMISA Board.  The current Board was dealing with the legacy issues but the current scenario had changed. He hoped that the re-mandating of NEMISA by the DOC would be successful.

Mr Tshidzumba responded that the announcement of the review of the NEMISA mandate was announced during the prior week. The new Board had been in position for a year but regular reports were being issued.

The Chairperson advised that the Committee would discuss the issue of the NEMISA mandate and the financial support of the entity with the DOC. He thanked the delegates for the briefings to the Committee.

The meeting was adjourned.